How Branding Impacts Employee Turnover

Brand Strategy // 10.14.16

By Britt Stromberg

I looked up from email on my morning train ride to see who was talking. My spying eye recognized two acquaintances who currently work at Nordstrom.

"Yeah, this steady stream of exits is starting to affect my morale.”

Here in Seattle, we pay close attention to these two homegrown brands as they are big employers and key economic indicators.

I wondered what was making people leave Nordstrom for REI: Money? Management? Weak sales? Why would an employee consider leaving a well-known company with such a strong brand? Of course, my brain went in to branding mode.

Can a strong brand lower employee turnover?

It turns out, being able to answer this question is paramount to a company’s employees. According to CareerArc, 75% of job seekers consider an employer’s brand before even applying for a job. If the brand is strong, it’s strong for all the stakeholders — employees, customers and even investors.

For employees this translates into loyalty. New hires in an organization with a strong employer brand are 40% less likely to leave after the first six months. Many companies forget this.

It’s clear that today’s companies need to actively cultivate their brand internally and create a culture that resonates with their brand values in order to keep top talent. Let’s look at some examples of how strong internal brand culture can strengthen employee loyalty and how weakening a brand’s mission has the potential to increase turnover.

REI’s brave decision to get employees and customers to #OptOutside

One rainy day in 2015 during a brainstorming session for Black
Friday, Seattle based REI considered a radical employee suggestion: shut
down the store on the highest of retail holy days instead of holding
the traditionally frenzied sale.

It seemed like an insane suggestion at first but upon further
consideration, REI’s CEO, Jerry Stritzke, decided it might be just crazy
enough to work. CCO Ben Steele positioned the idea as one focused “less on direct promotion than highlighting consumer choice.”

What's been fascinating to watch is the halo effect as bike shops and
other outdoor retailers joined the campaign to choose hiking, biking or
camping over shopping. I still see the #optoutside hashtag on friends’
Instagram feeds when sharing pictures of hiking and camping.

This radical decision showcased REI’s brand promise:
a life outdoors. It was courageous to choose the busiest shopping day of
the year to show the world what REI considered important. And the bet
paid off. As reported in the Puget Sound Business Journal, the
#OptOutside campaign reinforced employee connection to the REI brand
promise, resonated with REI’s customers, and brought in record revenue
for 2015 of $2.4 billion, a 9.3 percent increase over the previous year.
REI membership also grew by a whopping 1 million people.

Ben Steele reflected, “Even if no one else in the world cares, that's
12,000 employees who get to spend the day outside with the people they
love, not thinking about how to get to the store.”

REI put into action their brand's promise. We are people who
prioritize enjoying the outdoors above all. Nature over
materialism. They also showed what they are not: people who when given a
choice, will choose shopping over being outside. This choice
demonstrated solidarity between employees and customers.

REI says this on their web site, “Our core purpose guides everything
we do: we all work to inspire, educate and outfit for a lifetime of
outdoor adventure and stewardship.” Their #OptOutside proved it and
reminded employees why they chose to work at REI in the first place.

Nordstrom confuses employees and customers with too many bets

In the About Us section on the Nordstrom web site they say, “Fashion changes. Shopping changes. Our commitment to happy customers doesn't.” But as fashion is changing at a rapid pace never seen before and with seven consecutive quarters of YOY revenue decline (Retail Dive), Nordstrom has been forced to revise their business and brand strategies.

Overall sales have fallen in recent years due to the huge shift in the apparel industry. Like most retailers, Nordstrom had to invest a huge amount of resources in online shopping experiences now resulting in nearly a quarter of overall sales.

In addition, Nordstrom continues to expand their popular discount brands Nordstrom Rack and HauteLook with sales up 38%. These two new revenue streams have the potential to erode Nordstrom’s well-established high-touch brand with their core audience of loyal Nordstrom Points shoppers. This is the audience that Nordstrom employees are trained to serve with the famous single HR directive, “Use your best judgement.”

In addition to trying to keep long time customers happy, Nordstrom is
on the hunt for new customers. They hired Creative Director,
Olivia Kim, who came from the high-end boutique Opening Ceremony, to
create in-store pop up experiences. They are inviting brands such as Topshop, Madewell and JCrew to share floor
space and hook the next generation of customers. They also continue to
invest in glitzy brick and mortar shopping experiences and to expand
their bargain brand, Nordstrom Rack, with hundreds of new stores.

Employees are feeling these changes first hand: the company recently
laid off 131 people from their technology team and 400 additional
positions as they struggle to find balance between digital and in-store
sales.

My own personal experience shopping in-store and online at Nordstrom
has been impacted by this fragmented strategy. I’ve had a Nordstrom card
since college. I’ve watched with more than professional interest over
the past few years as they’ve remodeled their flagship store in downtown
Seattle and tried to align their online strategy with their high-touch
customer service approach. The changes aren’t resonating with me. In
fact, I’m starting to feel that the brand is going through a mid-life
crisis, walking away from the loyal target audience by trying to woo
either the one-percenters or the youth market. “Trying to woo” being the
operative phrase.

These kind of changes make both customers and employees ask: what
does Nordstrom stand for? Which of these customers is their brand trying
to reach? How should employees continue to make customers happy? How do
all of these new brands reflect Nordstrom’s core mission and values?

All of this brand dilution is dangerous and potentially confusing for
Nordstrom customers and employees. This whirlwind of change is enough
to make a long-time customer seek out other brands, namely Amazon.

To bolster this erosion, Nordstrom needs to create an internal
campaign to both educate and affirm their employees on their brand. They
need to show them the strategic road map that will get Nordstrom new
customers online and in stores, and they need to reassure jittery
employees that the personal touch that is so important for their
customers remains the core of their brand for the future.

So what lessons from these two brands can you apply to your company to keep your employees engaged and focused?

Know your audience. I'm a broken record on this point. It always comes back to your audience, which includes your employees. You would not be in business without your audience. Get over what you think you know about them and do the work of truly understanding what they want and need.

Involve your employees in developing and maintaining your brand’s promise. While you do need vision and leadership at the top, you have to be open to listening to how all of your employees interpret the brand. This gets more complicated as a company becomes larger, but systems need to be put into place for employees to feel heard. Then demonstrate that you’re listening by acting on their input.

Identify a person or a core team that’s going to be the soul of your brand. They need to represent and inspire all of your audiences—employees AND customers. Give them authority to act boldly and interpret your brand strategy in new ways over time.

This tale of two brands highlights these three tactics. One brand really knows their audience and what buttons to push to drive fanatic loyalty. The other beloved brand appears to be distracted by trying to appeal to everyone, which pleases no one, including their own employees.

Co-Founder & Strategy Director

Britt Stromberg is the Co-Founder of States of Matter and our Director of Strategy. When you put your business and brand in her hands, she will think crazy carefully, listen to her gut, sleep on it—then do the research to be certain.